12 Expenses for Your Small Business You Need to Know in 2022
- September 9, 2022
- By REIL Capital
Establishing a new business is very intimidating, especially at the beginning when you need to take into consideration how you’ll be able to pay for the expenses incurred before your small business even generates income.
What are Small Business Expenses?
Investopedia defines business expenses as costs incurred in the business’ ordinary course wherein the expenses are deducted from the revenue to reach the taxable income of the business.
Small business expenses are deducted before the government imposes a tax on them. This means that these costs aren’t part of your taxable profit.
Deductible VS. Non-deductible Expenses
There are two categories when it comes to small business expenses. These are deductible and non-deductible expenses. Let’s take a closer look at each kind of expense and how it differs from one another.
Deductible expenses are expenditures for business costs such as rent, utilities, etc., and are incurred in regular business activities in which the owner can deduct it from the gross earned income for tax purposes.
Not all expenses can be deducted, hence why there are non-deductible expenses. These are costs that don’t have direct concerns with your small business. These include personal and commuting costs, gifts, meals, and travel expenses for extra travelers.
Small Business Expenses Categories to Be Aware of
As a small business owner, it is definitely overwhelming at the very initial stage since you’ll be listing down every expense you will need to pay in order to keep your business running. Here are some expenses that every small business needs to allot a budget for.
For businesses that are starting out, there’s a high chance of an immediate need for equipment. This could get expensive, depending on the kind of business you have. For example, you will need to purchase trucks if you are a moving company, or essential kitchen equipment if you’re running a restaurant.
Conducting market research is essential before you begin your small business. It helps determine how to play your cards right in the industry you’re focusing on. While this can take up so much time and effort to do, you may want to hire experts in market research which you will need to pay for.
If you’re going to be leasing an office or commercial space, then this will take up a lot of money. This is why many small businesses start out from homes. But, once you’re ready to move out to a much bigger space, keep in mind that you need to factor in lease negotiations, furniture buying, layout design, etc.
In order to gain traction in your small business, you need to spread the word around to acquire recognition from people. You can achieve this by investing in print ads, websites, posters, etc. When you want to hire a marketing company to promote your small business, you’ll need to cover those expenses.
Just like your car and your health, you’ll want to protect your small business, as well. There are a couple of business insurance plans in the market, you’ll need to do your diligent research to figure out the perfect insurance plan for your small business.
Equipment can break down anytime or be in due for an annual maintenance check, which is why you’ll need to allot a specific budget for this as well. Nothing is more frustrating than having your equipment not working during operating hours as this can incur profit loss.
This includes internet, cell phone, gas, and electricity bills–which all cost money, obviously. However, if you’ll be operating your small business at home then this will cost significantly less.
Bookkeeping and accounting software, as well as premium eCommerce software in order to keep your small business up and running, will require subscriptions that will need to be paid again after a certain amount of months depending on your plan in order to have access to their features once again.
For individuals that are self-employed and pay for their own insurance or any medical care costs, then these expenses can be deducted from their tax returns. This includes prescribed medicine or doctor’s fees.
Hiring public accountants, lawyers, financial planners, or other professionals fall under this category of small business expenses.
Shipping and Postage
You’ll need a way to deliver your products to your customers as well as return shipping labels, these all include having to get stamped on and paying postage fees that will vary on the courier you choose.
Your employees need to be paid even when you aren’t generating any income yet from your small business. Their salaries and bonuses are considered tax-deductible expenses. Don’t forget to pay yourself too! The expenses for payroll include commissions, stipends, benefits, and overtime pay.
A business is an investment that you need to take care of and nurture for it to grow. Before you start one, you need to canvas your idea or product, and how much you’ll charge for it, in order to be able to pay for your expenses and generate profit as well in the long run. It’s important to create an accurate estimation of how much everything is going to cost–sum it all up before you begin, as well as any assets you’ll be needing.
REIL Offers Easy Solutions for Your Small Business
It’s important to have enough cash flow at the start of your venture. Many business owners come to the realization that they don’t have enough of that to expand their business. Luckily you’re on the right page because REIL Capital has your back.
Need help with business funding? REIL Capital offers various financing and lending services that will surely help keep your business’ cash flow on the greener side. Apply for financing today!